Cash Conversion Cycle Calculator
Calculate the cash conversion cycle: DIO + DSO - DPO.
About this calculator
This calculator measures how many days pass between paying for inventory and collecting cash from customers. Days Inventory Outstanding is average inventory divided by cost of goods sold, times 365 (line 10); Days Sales Outstanding is accounts receivable divided by revenue, times 365 (line 11); Days Payable Outstanding is accounts payable divided by cost of goods sold, times 365 (line 12). Cash Conversion Cycle adds the first two and subtracts the third (line 13, dio + dso - dpo), since inventory and receivables tie up cash while payables represent cash you're still holding.
At the default inputs, DSO and DPO happen to be equal, so inventory ends up the input that moves the overall cycle the most -- but each of the three day-count components responds to only two of the five inputs, and the other three leave it completely unchanged: inventory and cost of goods sold drive DIO alone, receivables and revenue drive DSO alone, and payables and cost of goods sold drive DPO alone. The three turnover ratios (Inventory Turnover, AR Turnover, AP Turnover) are each the reciprocal-style ratio behind one of the day counts, expressed as times-per-year instead of days. This model uses average balances you supply directly; it doesn't calculate averages from beginning and ending balance sheet figures for you, and a shorter cycle is generally better but the "right" CCC varies widely by industry.
Tax Disclaimer
This calculator provides estimates based on general tax rules and may not reflect your specific situation. Tax laws vary by jurisdiction and change frequently. Consult a qualified tax professional or CPA for advice tailored to your circumstances.
Inputs
Results
Cash Conversion Cycle
48.7 days
How to Use This Calculator
- Enter average inventory balance and cost of goods sold for the period.
- Input average accounts receivable balance and annual revenue.
- Enter average accounts payable balance.
- Review the Days Inventory Outstanding, Days Sales Outstanding, Days Payable Outstanding, and CCC.
- A shorter CCC means cash flows back to the business faster — target improvements in the longest component.
How the result changes with Average Inventory
| Average Inventory | Cash Conversion Cycle |
|---|---|
| $100,000.00 | 24.3 days |
| $150,000.00 | 36.5 days |
| $300,000.00 | 73 days |
| $500,000.00 | 121.7 days |
What each input means
- Average Inventory
- Average inventory balance for the period.
- Cost of Goods Sold
- Annual cost of goods sold.
- Accounts Receivable
- Average accounts receivable balance.
- Annual Revenue
- Total annual revenue.
- Accounts Payable
- Average accounts payable balance.
How this is calculated
Worked example, using the default values
- Identify Input Parameters4 parametersAverage Inventory = 200000, Cost of Goods Sold = 1500000, Accounts Receivable = 300000, Annual Revenue = 3000000 = 5 input(s) provided
- Calculate Cash Conversion Cycle48.7 = 48.7
- Calculate Days Inventory Outstanding48.7 = 48.7
- Calculate Days Sales Outstanding36.5 = 36.5
Engine last updated . Checked against 1 independently-derived test — how we verify calculators. Built by Paul Gunder, a software engineer, not a licensed financial, medical, or legal professional.
Frequently Asked Questions
Why does inventory drive the overall cycle more than the other inputs?
At the default figures, Days Sales Outstanding and Days Payable Outstanding happen to be exactly equal (both 36.5 days), so they cancel out of dio + dso - dpo and the cycle reduces to Days Inventory Outstanding alone -- making inventory (and cost of goods sold, which DIO is divided by) the inputs with the clearest effect on the combined Cash Conversion Cycle at this particular starting point.
Does accounts receivable affect my Days Inventory Outstanding?
No. Days Inventory Outstanding is computed only from average inventory and cost of goods sold (line 10, inventory / cogs * 365) -- accounts receivable, revenue, and accounts payable never enter that formula at all. Each of the three day-count components is calculated independently from its own pair of inputs.
What's the difference between Days Sales Outstanding and AR Turnover?
They describe the same relationship between accounts receivable and revenue in two different units. Days Sales Outstanding expresses it as a number of days (accountsReceivable / revenue * 365, line 11); AR Turnover expresses it as how many times per year receivables are collected (revenue / accountsReceivable, line 16) -- a higher turnover corresponds to a lower, faster DSO.
Why does cost of goods sold appear in two different day-count figures?
Cost of goods sold is the denominator for both Days Inventory Outstanding (inventory / cogs * 365, line 10) and Days Payable Outstanding (accountsPayable / cogs * 365, line 12), since it represents the total spend that both your inventory investment and your payables are measured against -- accounts receivable and revenue, by contrast, never appear in either of those two calculations.
Related Calculators
The questions that sit next to this one — chosen by subject, including calculators filed under a different category.
Accounts Receivable Aging Calculator
Analyze AR aging buckets and calculate days sales outstanding (DSO).
AccountingFinancial Ratio Dashboard
Calculate key liquidity, profitability, and leverage ratios from financial statements.
Business & EntrepreneurshipWorking Capital Calculator
Calculate working capital and working capital ratio. Assess your business's short-term financial health.
AccountingBreak-Even Units Calculator
Calculate the number of units needed to cover fixed and variable costs.
More in Tax & Accounting.